A report out of the World Economic Forum in Davos that claims Ottawa is abandoning plans to create a national securities regulator in the wake of the Supreme Court of Canada’s decision last month led to a day of confusion in Canada.

However, a transcript of the conversation between Finance Minister Jim Flaherty and a reporter for the Canadian Press on Thursday reveals that Ottawa is not walking away from the initiative, but rather, is still working toward the creation a Canadian securities agency with the help of the provinces, including Quebec.

In a series of answers to questions on the controversial issue of a federally-constituted national securities regulator, Mr. Flaherty spoke in detail about the landmark ruling by the Supreme Court, which underscored that the provinces are responsible for the day-to-day regulation of financial markets. At the same time, the high court also noted that broader issues, such as systemic risk, are the purview of the federal government.

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In Davos, Mr. Flaherty was asked what Ottawa intended to do in the wake of the top court’s decision in December. He responded by saying the federal government could not proceed with the legislation as it was drafted, adding the ruling noted there is both federal and provincial jurisdiction in the securities field.

According to a transcript provided by the Department of Finance, Mr. Flaherty said the federal government has begun discussions with the provinces about how the two levels of government can jointly move forward to establish a Canadian securities regulator.

“I hope that we can make an arrangement with the provinces to proceed with a Canadian securities regulator … I’ve had some discussions with some of the ministers responsible for securities regulation. … And some of our officials have also had discussions. So we’re trying to see if there’s a basis for going forward with the Canadian securities regulator in line with the decision of the Supreme Court of Canada. We’ll see. … The reception has been fairly good. There’s a recognition that the decision by the court found that there is some federal jurisdiction, and certainly provincial jurisdiction. So now we know it’s not 100 percent one way or the other, so we need to talk to each other.”

That sounds pretty clear but judge for yourselves. The following is the transcript of Mr. Flaherty’s remarks.

Question: Now, on the Securities Commission, you had time, I guess, to read the judgment from the Supreme Court.

Hon. Jim Flaherty: Mm-hmm.

Question: What’s going to be your next move? The Quebec government clearly thinks that you’re not going to do anything else, but what’s going to happen?

Hon. Jim Flaherty: Well, there are two important aspects of the decision of the Supreme Court of Canada. One is that day-to-day securities regulation is the responsibility of the provinces and territories. But they also said that there is an area of federal jurisdiction, including national standards and systemic risk. So I hope – and we’ll see – I hope that we can make an arrangement with the provinces to proceed with a Canadian securities regulator to deal with those aspects of the securities market that are interprovincial and global, that are applied beyond Canada.

Question: So it’s not going to be a national or federal – or I don’t know how you recall that, but it’s not going to be a central commission, but you want something to be worked in cooperation with the provinces?

Hon. Jim Flaherty: Right. I mean, we – it’s clear in the Supreme Court of Canada judgment that the day-to-day regulation of securities will remain with the provinces. That’s it.

Question: But do you want – would you like to have a body in place that could do, you know, oversee or, you know, do the part that’s federal?

Hon. Jim Flaherty: Yes, particularly with respect to risk that is broad based, that’s systemic. For example, when we had the crisis about asset-backed commercial paper several years ago, which affected Quebec significantly and Alberta, Ontario as well, at the end of the day, the solution came about through the federal government working with Alberta, Ontario and Quebec. That’s how the solution was arrived at. And some federal money was involved too. That’s typical. It’s very difficult to deal with any significant financial issue in Canada without the involvement of the Government of Canada because so much of the financial world is – applies to many provinces and territories, not just one.

Question: So do we need a new body, or can OSFI do that?

Hon. Jim Flaherty: No, I think we should have a new body. I wouldn’t want OSFI doing that because there could – there would be some conflicts there because OSFI regulates the banks and insurance companies.

Question: But you say that this new body would have the same goals as it had before the judgment.

Hon. Jim Flaherty: No, because it – the draft bill that we had tabled to Parliament was much broader. It got into the day-to-day regulation of securities and the people who work in that industry.

Question: So you’d like to start, I guess, talking to the provinces about that soon?

Hon. Jim Flaherty: Yes, we already have started talking. I’ve had some discussions with some of the ministers responsible for securities regulation. It’s not always finance ministers; in some provinces it’s other ministers. And some of our officials have also had discussions. So we’re trying to see if there’s a basis for going forward with the Canadian securities regulator in line with the decision of the Supreme Court of Canada. We’ll see.

Question: And what kind of reception do you get from the provinces so far?

Hon. Jim Flaherty: The reception has been fairly good. There’s a recognition that the decision by the court found that there is some federal jurisdiction, and certainly provincial jurisdiction. So now we know it’s not 100% one way or the other, so we need to talk to each other.

Question: Yes. So including in Quebec, did you talk to Mr. Bachand?
Hon. Jim Flaherty: I have not talked to Raymond directly on that subject, but my officials have had discussions.

Question: And so you think you could get the approval of Quebec for that project?

Hon. Jim Flaherty: I think Quebec should be willing to talk about it because there’s one part of the decision of the Supreme Court of Canada that talked about derivatives and seemed to indicate that derivatives might be a federal responsibility, which I know would concern Quebec because of the derivatives market in Montreal. So there’s lots of room for discussion.”